Lower expected demand combined with U.S. projects in the works to export liquefied natural gas could delay other LNG export projects in Canada, Australia and Africa, according to a report from Goldman Sachs Corp.
“Several projects in Canada and Australia will likely face final investment decision deferrals due to high and uncertain costs, and price-sensitive buyers,” the firm said last week.
Goldman Sachs trimmed its global LNG demand forecasts and is now expecting 5 percent compound annual growth rate by 2020 and a 4 percent through 2025 compared to 2013 levels. Previously, the firm had been looking for growth of 6 percent and 5 percent, respectively.
The United States, which has traditionally imported liquified natural gas, is now in the process of reversing its terminals to export shale gas from domestic plays, including the Marcellus that underlies much of Pennsylvania.
While Goldman Sachs has raised its estimates on the volume of LNG to be shipped from the United States, it expects the pace of growth to slow.
Forecasts of U.S. LNG export growth “have rapidly expanded” from 20 million tons per year (mtpa) to 30 mtpa in 2012 to a current forecast of 75 mtpa, according to the report. It cited “the increasingly supportive approach adopted by the Department of Energy and Federal Energy Regulatory Commission in recent years, ongoing shale success, and the pressure on Asia’s LNG buyers to reduce fuel procurement costs.”
Japan has been the key nation signing direct contracts to secure liquified natural gas supply sourced from shale plays in the United States. The Asian country has so far signed deals for 18 million tons per year — about 20 percent of its consumption, according to Goldman Sachs.
There are limits on how much demand there will be for new LNG export facilities going forward, the firm said.
It said the large, established U.S. import terminals that already have infrastructure in place have an advantage over new sites that would have to be built from the ground up.
Early movers like Houston-based Cheniere Energy, which is in the process of reversing its existing import terminals to now export liquefied natural gas from the Gulf Coast, have a head start, Goldman Sachs said.
The most recent project to receive federal approval is Dominion’s Cove Point LNG in Maryland. Regulators gave that project, the closest export facility to the Marcellus Shale, the final OK on Oct. 1.
However, “The window for U.S. LNG is limited,” Goldman Sachs said.
“Given the substantial contracts that have been signed in the last couple of years with U.S. LNG projects, we believe investors should seek exposure to low-cost LNG export capacity, and be realistic about expectations for further contracts,” the firm said.